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Investing.com -- ServiceNow shares have retreated sharply this year, declining roughly 43% amid a broader software sector drawdown.
The stock, trading around $88 as of Tuesday, was dragged lower by an AI disruption narrative — concerns that artificial intelligence could erode demand for the kind of workflow automation software ServiceNow sells.
However, Oppenheimer analyst Brian Schwartz pushes back on that view, arguing that ServiceNow may in fact be one of AI’s clearer enterprise beneficiaries.
While maintaining an Outperform rating on the stock, Schwartz has cut the price target on the stock to $130 from $175 — a move he attributes to lower software group multiples broadly.
The analyst expects first-quarter revenue of $3.74 billion, up about 21% from a year earlier, with pro forma earnings of $0.96 per share.
“Our research mosaic around demand activity, AI momentum, performance, and execution weighed slightly positive for ServiceNow’s business in 1Q. Thus, we expect some upside to consensus estimates,” he wrote in a note.
Oppenheimer estimates that federal government obligations have fallen 72% year-over-year in the quarter, to roughly $48 million, less than half the three-year seasonal average of $99 million.
The decline is partly explained by a partial government shutdown and a tough year-ago comparison, but it remains a meaningful headwind to the company’s Current Remaining Performance Obligations metric (cRPO), a closely watched indicator of future revenue.
Industry checks also moderated from the prior quarter, with contacts flagging softer big-deal activity and weakness in the public sector. Against that, the same contacts reported "accelerating usage growth and expansion activity for ServiceNow’s AI business,” Schwartz noted.
Overall, while AI disruption fears “may keep ServiceNow as a ’show-me-stock’ post earnings," Schwartz said, he believes that with the stock down 43% year-to-date and sentiment near a low, the risk/reward looks attractive for long-term investors.
The analyst sees ServiceNow on track to become "the first enterprise software name with a 10%-plus-of-revenue AI business, likely in 4Q26," which he believes would restore its standing as an AI winner and drive multiple expansion.